Although today's credit card transactions often take seconds or less to authorize, there are many parties involved in clearing the transaction. For example, credit card transactions frequently occur because of interactions between merchants, acquiring banks, credit card associations, credit card issuers and consumers.
Credit card associations, such as Visa®, MasterCard® and American Express®, act as custodians and clearing houses for their respective card brand. The primary responsibilities of card associations include governing their members, establishing interchange fees and qualification guidelines, acting as the arbiter between issuing and acquiring banks, maintaining and improving the card network and making a profit.
Acquiring banks, or “merchant banks” are registered members of card associations that contract with merchants to create and maintain merchant accounts that allow merchants to accept credit and debit cards. Acquiring banks deposit funds from credit card sales into a merchant's bank account. Payment gateways may also provide portals that route transactions to acquiring banks, for example through the use of online shopping carts and the like.
Credit card issuers issue credit cards to consumers. Issuing banks pay acquiring banks for purchases that their cardholders make, and the cardholder is responsible for repaying the issuing bank under the terms of their credit card agreement.
Card issuers, acquiring banks and payment gateways all level fees on either or both of the merchants and card members for each transaction. Therefore, while the current payment authorization network can quickly authorize consumer purchases, they are expensive. For example, there may be wholesale fees charged by credit card issuers and credit card associations. On top of the wholesale fees, merchants may incur credit card processing fees, payable to acquiring banks or payment gateways.
It would be desirable to identify a system and method for quick, reliable processing of consumer transactions without the inherent expenses of current credit card processing systems.